The international rating agency, Moody’s, has warned that the economic reforms of Nigeria’s President Bola Tinubu could lead to social unrest that would potentially derail progress, urging for a delicate balance between pandering to the haves and the have-nots.
Moody’s latest report titled “Inside Africa, 2023” noted that, though Tinubu’s policy direction is commendable and crucial for the nation’s economic growth, it, however, carries significant political risks relating to a transitional period of high domestic inflation and consequent public outcry.
According to the credit rating agency, the removal of petrol subsidy, which had largely favoured wealthier households and was equal to the combined budget on education and health for 2019, would raise oil prices and reduce the purchasing power of citizens, against the backdrop of crushing inequalities.
It also noted that the administration’s foreign exchange (FX) unification policy would reduce market distortion but it has weakened the Naira and led to higher imported inflation.
Analysts at Proshare Nigeria noted that while President Tinubu’s pro-market policies have continued to receive favourable reviews from international agencies and companies, the realities in the wallets of Nigerians tell a different tale.
According to policy analysts, the ultimate priorities of the government should be on improving the welfare and prosperity of Nigerians, rather than pandering to foreign economic preferences.
They, however, noted that for Nigeria to relieve the stress of its citizens, it must attract direct foreign investors and investment (DFI) and therefore, provide a compelling reason for fresh investment funding.
Analysts believe that President Tinubu’s ambitious reform agenda holds the potential for significant long-term economic gains, particularly with a more efficient allocation of resources and improved foreign investment.
However, the short-term pains of higher cost of living, lower purchasing power, and looming social unrest present substantial risks. While intended to curb the corruption and inefficiencies associated with the subsidy regime, the oil subsidy reform could worsen social inequalities and poverty in the short term, as the palliatives would only marginally offset the large spike in costs borne by Nigerians.
-Media Report